Do you and your family have a ranch succession plan? There are two components that go into succession: management and assets. Asset succession gets a little complicated, as the powers that be have created so many rules around what is possible and the tax implications you face. Management succession is complicated because it requires planning, communication, and executing that can’t be passed off to lawyers and accountants. I’m not going to go into detail about all of this, but I am going to share with you what my plan is, recognizing that sometimes there are circumstances dealt to us that we cannot control: we make plans and God laughs. There is absolutely no “one size fits all” approach to farm/ranch succession. There is no cookie cutter method we can each follow, which is simultaneously our blessing and our burden. However, here is my plan. I feel extremely vulnerable writing this, as I am certain there is lots of room for criticism, but I hope that you recognize this is only my plan and does not have to be yours.
MDH and I currently manage and operate our family ranch. We give ourselves a decent salary and benefits package that allows us to live and invest for our retirement. We have 2.5 children who are far too young to know what they want for their future, but we hope one of them will be interested in taking over the ranch when we are ready to retire. Here are a few of our beliefs:
We believe VERY strongly that the sustainability of family ranches relies on providing a good experience and creating an opportunity for the next generation. We do not want to hand down a ranch that is in financial or economical stress. We also do not believe that the next generation should have to buy us or their siblings out. This can be a very controversial, because many people believe that if the next generation does not earn the ranch or have any skin in the game, they will not do a good job operating it. I disagree. Once they are in control, it is their responsibility to continue operating the ranch in a way that is successful financially and economically. This is a big task that is not easy. They don’t need additional hardships provided by their parents to ensure that they “earn” what they are getting.
We do not believe that ranch management or assets should be split equally amongst our three children. Gabe Brown, regenerative ag pioneer, has a really good philosophy on this. He talks about it in chapter six of his book “Dirt to Soil”, which is definitely worth a read. With a lot of communication and input from each child, one child will be chosen to take over management of the ranch. This won’t simply be the first child to move home. We recognize that sometimes one child chooses a longer college path, and that being away from the ranch for at least three years after college is very valuable. We will also not make this choice on our own. This will be an ongoing conversation amongst us and all of our children throughout the years. They will all know early on that only one child will be chosen to pass the ranch to. If that child chooses to hire his/her siblings to be part of the operation, that is completely their choice, but there will only be one child in charge and given ownership. This might sound harsh, or like we will have to pick favorites; however, I’ve seen many ranches end up selling out or splitting up because there were too many heirs to the throne. When you end up with a large group of shareholders, the family relationship of the ranch often breaks down. Also, we do not believe that we owe our children an inheritance, we believe we owe it to our legacy and to our land to provide a ranch manager who will strive to operate the ranch with ecological success, financial and economic success, and family and people relationship success.
The next generation does have to prove that they are a good fit for managing the ranch. This does NOT mean they have to do things just like we did them. It does NOT mean they can’t make mistakes. What this means to us is that they share the philosophy that agriculture is important and valuable in the world, and that our ranch is contributing our small part to that. They also have to have a shared vision that the ranch will stay in the family for many generations to come. They also have to share the philosophy that they will strive to operate the ranch with the three most important pillars in mind: ecological success; financial/economic success; and family and people relationship success.
Before we turn 55, we will set a retirement date that will occur before we are 65. On that day, we will completely turn all management over to the next generation. If we would still like to be involved on the ranch, we will request to be hired for a labor/technician position, and hiring will be the choice of our child. However, more likely we will step away and begin retirement. We are currently saving for retirement and will have enough money by that time to retire without financial worry. Personally, I do hope to provide the other children some monetary value in the form of a life insurance policy that they may cash out early. However, this is not required and should not be expected. I do not owe that to them, I want to give that to them.
We recognize that there are many factors that could change this plan over the years: Death, disability, no children wanting to come home, etc. These circumstances cannot be predicted, and just have to be dealt with as they come. We can have a disaster plan, but we simply cannot create contingency plans for all the possible variables.
So why am I sharing this? One, because I hope it will encourage you to form your own plan, and maybe give you some food for thought. Two, because this plan has been created while looking through the lens of a 35 year old. Twenty years from now I want you to hold my feet to the fire on this when I am looking through the lens of a 55 year old, and my perspective has likely changed.
Last, I want to be clear that this is what works for our situation, and may not work for your situation. I am not trying to tell you that what you are doing is wrong. If it works for you and your family, do it, and don’t listen to a word I say. I can’t stress that enough. However, I do think it is important to have a plan. Good luck! If you feel stuck, there are some great resources available to help you work through this. Reach out, and I will send them your way!
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